Rebuilding Your Credit After Delinquency

Many of us have missed a credit card payment at some point, either by accident or because we were waiting for payday. This type of credit card delinquent is easy to resolve and may not even affect your credit score. However, if you let your credit card bill go unpaid for months, you run the risk of falling into a credit card delinquent situation that can seriously damage your credit and even expose you to legal action.

While it’s relatively easy to recover from minor credit card delinquencies, ignoring your credit card bills for an extended period of time can be costly: your credit card accounts can be closed and charged off, your debts can be sent to collection agencies, your wages can be garnished, and you’ll also have a negative mark on your credit report that can remain for up to seven years.

In this guide, we’ll explain what credit card delinquency is and what to do if you find yourself in this situation.

What is a credit card delinquent?

When you’re late on a credit card payment, the account is considered delinquent. Most credit card companies don’t report delinquent credit accounts to the credit bureaus until a payment is 30 days or more late, so as long as you notice and pay your delinquent credit card bill in time, the delinquent bill won’t negatively impact your credit score.

However, if a credit account goes 60 days delinquent, that information is reported to the credit bureaus and negatively impacts your payment history, the most important component of your FICO credit score. Not only will your credit score be affected, but your credit card issuer may increase your interest rate to a penalty APR rate, which can be quite high, usually around 29.99 percent.

If an account remains delinquent for more than 90 days, a lender may decide to close the credit card account and send the debt to a collection agency. The account may also go into default, which is a negative mark on your credit report and can seriously damage your credit score.

Steps to recover from a delinquent credit card payment

If your credit card account is delinquent, don’t panic. Follow these steps to clear your delinquent account:

1. Start making payments nowIf your credit card is past due for more than 30 days, you should prioritize paying it off as soon as possible (ideally at least the minimum payment). Many people struggle to pay off their credit card debt, especially if it starts to get out of control. But the sooner you start making payments, the sooner you’ll be able to get out of delinquency and get back on track.
2. Please contact your credit card issuerMany lenders have hardship programs designed to assist consumers who are facing financial difficulties. For example, you may be able to get a lower monthly payment or apply for a credit card forbearance plan that allows you to postpone payments for a certain period of time.
3. Contact a nonprofit credit counselorA credit counseling agency may be able to help you create a debt management plan (DMP) with your card issuer, which could include lowering your monthly payments and possibly even lowering your interest rate. If you go this route, be aware that you may have to close some credit card accounts.
4. Work out a payment plan with the debt collectorIf your delinquent credit card debt is already in collections, you can also contact the debt collection agency directly to set up a payment plan. You may also be able to negotiate a debt consolidation and resolve your debt by paying a large portion of your balance in one lump sum. However, consolidating your debt for less than you originally agreed to could have a negative impact on your credit score. A credit counselor can advise you on this process and help you determine whether a DMP or debt consolidation makes more sense for you.

Steps to take once your account is cleared

Once you have cleared your delinquent credit card accounts, you can focus on avoiding late payments and rebuilding your credit score if necessary. The following steps can help:

Change your credit card habits

The best way to bounce back after a default is to take a closer look at your overall credit habits. Establish more conscientious credit habits so you don’t fall into a never-ending cycle. Follow these tips to avoid defaulting on your credit cards in the future:

• Set up automatic payments: If you manage multiple credit cards at once, it can be a pain to remember when to pay your credit card bill each month. To avoid missed payments, late fees, and penalty APRs, consider setting up autopay. With autopay, your balance (or minimum payment) is automatically transferred so you don’t have to worry about missing a payment.
• Stop paying with credit cardsIf you’re worried that a particular credit card will dig you a bigger hole, put it away for now. It’s much easier to stay on track and pay your credit card bills on time if you don’t accumulate more debt. Put your credit cards in your stocking for the time being and rely on your debit cards.
• Contact the publisherIf you’re worried about being late on a credit card payment, call your card issuer and ask how they can help you. For example, you might be able to negotiate a payment plan that lowers your monthly payments. After all, it never hurts to ask.

Make sure to remove any late payments from your credit report

If you have past due credit card debt that hasn’t yet been charged or sent to collections, paying it off on time is the best way to reduce the impact that delinquency has on your credit score. Although a few missed payments will show up on your credit report, if you have a history of making on-time payments you can overcome short-term delinquencies.

Negative credit report items such as late payments and collection accounts are typically removed from your report after seven years. If an old debt hasn’t been removed from your credit report after seven years, contact the three major credit reporting agencies (Equifax, Experian, and TransUnion) and ask them to remove the delinquent debt from your credit report.

Your credit report may show delinquent debts that aren’t actually yours, so it’s important to regularly request copies of your credit report and dispute any errors you find. If you see delinquent debts on your credit report that you don’t own, remove the debts as soon as possible so you can maintain the credit report and credit score you deserve.

Conclusion

Late payments on your credit cards can leave a long-term negative mark on your credit report, but they can be avoided with good financial habits. If you’re facing a late payment or are recovering from a recent late payment, creating a sound plan for using your credit cards responsibly can help prevent it from happening again.

Don’t forget: there are plenty of resources available to you. You can ask about your credit card issuer’s hardship programs or even work with a certified credit counselor to develop a debt management plan. If your credit score is high enough, you could also consider transferring your debt to a card that has a favorable introductory APR offer. This allows you to delay payments without paying interest, as long as you pay it off in full before the end of the introductory APR period.

Frequently asked questions about late credit card payments